Cerberus Led Consortium To Buy 51 Percent Of GMAC Equity DETROIT - General Motors Corp. (NYSE: GM) today announced it has entered
into a definitive agreement to sell a 51-percent controlling interest in General
Motors Acceptance Corp. (GMAC) to a consortium of investors led by Cerberus
Capital Management, L.P., a private investment firm, and including Citigroup
Inc., and Aozora Bank Ltd. GM expects to receive approximately $14 billion in
cash from this transaction over three years, including distributions from GMAC,
with an estimated $10 billion by closing. The transaction strengthens GMAC's ability to support GM's automotive
operations, improves GMAC's access to cost-effective funding, provides
significant liquidity to GM and allows GM to continue to participate in the
profitability of GMAC over the long term through its 49-percent ownership stake.
"We look forward to working with Cerberus to maintain and grow GMAC's
traditional strong performance and contribution to the GM family," said GM
Chairman and Chief Executive Officer Rick Wagoner. "This agreement is another
important milestone in the turnaround of General Motors. It creates a stronger
GMAC while preserving the mutually beneficial relationship between GM and GMAC.
At the same time, it provides significant liquidity to support our North
American turnaround plan, finance future GM growth initiatives, strengthen our
balance sheet and fund other corporate priorities. "Over the last nine months we have been aggressively implementing our North
American turnaround plan," Wagoner said. "We've made some big moves, such as the
health-care agreement with the United Auto Workers union; the manufacturing
capacity plan; changes to our salaried health-care and pension plans; an
accelerated attrition plan for hourly employees; and a complete overhaul of our
marketing strategy. These bold initiatives are designed to immediately improve
our competitiveness and position GM for long-term success and today's transition
is a further step in that direction." The GM Board of Directors approved the sale in a special meeting on Sunday
which followed extensive consideration of this transaction and alternative
strategies over the past several months. Speaking for the GM Board, Presiding
Director George Fisher stated, "This transaction along with the other progress
GM has been making on its turnaround plan, is an important milestone. While
there is still much work to be done, the GM Board has great confidence in Rick
Wagoner, his management team and the plan they are implementing to restore the
company to profitability." The transaction is subject to a number of U.S. and international regulatory
and other approvals. The companies expect to close the transaction in the fourth
quarter of 2006. Long-Term Relationship "We are very proud to align ourselves with an American icon like GM through
GMAC, one of the most recognized and respected names in the financial services
industry," said Mark Neporent, Cerberus' chief operating officer and senior
managing director. "We are committed to a long-term partnership that we expect
will bring sustained growth, diversity of product offerings and lasting benefits
to GM and GMAC employees, dealers, suppliers, customers and other
stakeholders." "We are committed to helping GMAC compete even more effectively and
continuing its tradition of strong growth and success," added Lenard Tessler,
Cerberus' head of Private Equity and senior managing director. "We recognize
that GM's dealers are a cornerstone for growth in this business, and we are
committed to maintaining the strong support that GMAC provides to its dealer
customers. Moreover, we have great confidence and respect for the people of
GMAC, and look forward to the continued success of the GMAC automotive
financing, mortgage and insurance, banking, and real estate services businesses
around the globe." GMAC Chairman and Chief Executive Officer Eric Feldstein, who will continue
to lead the company after the equity sale, said, "This transaction begins an
exciting new chapter for GMAC that will allow us to realize our strategic vision
of becoming a premier global financial services company. With improved access to
cost-effective funding, we will be able to provide more competitive financing to
promote GM vehicle sales and to re-establish our historic trend of profitable
growth across all our business sectors. GMAC is now poised to move from a
defensive game plan to playing offense again, which should enable us to deliver
tremendous value to our shareholders." As part of the transaction, GM and GMAC will enter into a number of 10-year
agreements under which GMAC will continue to support GM's automotive operations
and provide GM and its dealers and customers with the same broad range of
financial products and services it does today. Customers and dealers should
continue to expect the world-class service that GMAC currently provides, and
GMAC will continue to be the preferred and exclusive provider of various
financial products involving GM-sponsored consumer and wholesale marketing
incentives around the world. Additionally, employment levels are not expected to
change as a result of this transaction. Under the agreements, GM will have an
option to acquire GMAC's global automotive finance operations, under certain
conditions, including an investment-grade rating at GM. This option is
exercisable for 10 years after the closing of the transaction. GM to Receive $14 Billion in Cash The $14 billion in cash that GM is to receive as part of the transaction
includes $7.4 billion from the Cerberus-led consortium at closing and an
estimated $2.7 billion cash distribution from GMAC related to the conversion of
most of GMAC and its U.S. subsidiaries to limited liability companies. In
addition, GM will retain about $20 billion of GMAC automotive lease and retail
assets and associated funding with an estimated net book value of $4 billion
that will monetize over three years. GM also will receive dividends from GMAC equivalent to its earnings prior to
closing, which largely will be used to fund the repayment of various
intercompany loans from GMAC. As a result of these reductions, GMAC's unsecured
exposure to GM is expected to be reduced to approximately $400 million and will
be capped at $1.5 billion on an ongoing basis. GM and the consortium will invest $1.9 billion of cash in new GMAC preferred
equity -- $1.4 billion to be issued to GM and $500 million to the Cerberus
consortium. GM also will continue to receive its 49 percent share of common
dividends and other value generated by GMAC. GM will take a non-cash pre-tax charge to earnings of approximately $1.1
billion to $1.3 billion in the second quarter of 2006 associated with the sale
of 51 percent of GMAC. Citigroup Providing $25 Billion Syndicated Funding
Facility Citigroup will arrange two syndicated asset-based funding facilities that
total $25 billion which will support GMAC's ongoing business and enhance GMAC's
already strong liquidity position. Citigroup has committed $12.5 billion in the
aggregate to these two facilities. The funding facilities are in addition to
Citigroup's initial equity investment in GMAC. "Citigroup has a 90-year relationship with GM and this transaction represents
both an opportunity to demonstrate our ongoing commitment to its long-term
success as well as an attractive investment opportunity. We are pleased to be
part of this unique and strong partnership, led by Cerberus," said Michael
Klein, chief executive officer of the Global Banking Unit of Citigroup Corporate
and Investment Banking. The GMAC board of directors will have 13 members - six appointed by the
consortium; four appointed by GM; and three independent members. GMAC will
continue to be managed by its existing executive management. GM expects that the introduction of a new controlling investor for GMAC, new
equity capital at GMAC, and significantly reduced inter-company exposures to GM
will provide GMAC with a solid foundation to improve its current credit rating.
GM and GMAC expect that these actions will de-link the GMAC credit ratings from
those of GM. About GM
GM To Receive $14
Billion In Cash Over Three-Year Period
April 3, 2006
GM Reaches Agreement to Sell Controlling Stake in GMAC
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